UPDATE 1-Fiat meets Monti amid Italy investment concerns

Thu Mar 15, 2012 7:29am EDT

* Fiat to invest 2.5 billion euros in Italy

ROME, March 15 (Reuters) - Italian carmaker Fiat's top executives will discuss the company's future investment plans in Italy with Prime Minister Mario Monti tomorrow, amid concerns in Italy that the weak car market could force Fiat to close another Italian factory.

Fiat CEO Sergio Marchionne and Chairman John Elkann will meet Labour Minister Elsa Fornero and Industry Minister Corrado Passera after their meeting with Monti, Fornero told the Senate on Thursday.

The Fiat executives will reiterate the company's plans to spend 2.5 billion euros ($3.3 billion) on revamping its plants in Italy, a company spokesman said.

One billion euros is being invested in a plant outside Naples where its compact Panda is being manufactured. In Turin, the company plans to spend 1.5 billion euros at its Mirafiori and Grugliasco plants, where it will manufacture a small Alfa Romeo SUV, a Fiat, and two Maserati models.

Declining sales in Italy and in Europe have caused volume carmakers like Fiat, which loses money on its mass market brands in Europe, to cut costs. The company closed a factory in Sicily last year. It pledged last year to spend 20 billion euros in Italy to 2014 with its sister company Fiat Industrial.

Minister Fornero said on Thursday Fiat's management had assured the government the company was committed to its current industrial plan.

It will be Monti's first official meeting with Marchionne and Elkann. The Prime Minister is well acquainted with Fiat, since he served on its board from 1988 to 1993 and is a friend of the Agnelli family, Fiat's controlling shareholder. He attended John Elkann's wedding in 2004.

It is likely the meeting will also focus on Monti's plan to reform Italy's labor rules, which should be finalized next week. The planned changes would alter Italy's unemployment insurance from 2017, Corriere della Sera reported on Thursday.

Fiat, which controls US automaker Chrysler, has taken steps to make sure it has enough cash to ride out weak market conditions. But its frugality has made it unpopular in Italy with unions, suppliers, and dealers who depend on new models for their livelihood.

To save cash and survive in its withering domestic market, Fiat has cut new model releases in 2012 from a planned 10 to six. New models from Alfa Romeo won't come until 2013, and its top selling Punto upgrade is on hold until 2014.

The dearth of new investment has fed concerns that the company aims to reduce its footprint in Italy in favor of the US and Latin American markets, where it makes a profit.

Marchionne said in an interview last month that Fiat could shut down two plants in Italy if plans to export cars to the US fail, adding fuel to its critics.

The company said on March 5 it had no plan to close down any of its five car plants in Italy.

Fiat will make an announcement on its plans for Alfa Romeo models soon.

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